U.S. President Barack Obama urged Israel on Wednesday to work with all parties to find a solution for Gaza Strip and said the United States is providing US$400 million in new aid for the Palestinians. In comments made as he met Palestinian President Mahmoud Abbas, the American leader called on Israel to curb settlement activity and on the Palestinians to prevent any actions that could incite confrontation.

According to Reuters, Obama called the situation in Gaza Strip unsustainable and said it was important to get all the facts out about last week flotilla incident.

Abbas, speaking after Obama, called on Israel to lift its "siege" on the Palestinian people.

Later in an interview, Abbas has ruled out any agreement without a Palestinian Capital in East Jerusalem. "Not possible. Not possible. Not possible in any way. East Jerusalem is occupied territory. We will not sign any agreement that does not include East Jerusalem as the capitol of Palestine," Abbas said. "The entire world recognises that including the US, including Olmert who says East Jerusalem or what he calls the Arab neighbours are for the Palestinians and it is their capital. We cannot accept any solution that excludes East Jerusalem," he stressed.